How to Determine Budget Percentages

If this is your first time making a budget, you may ask what percentage of your paycheck should go toward categories like groceries, entertainment or transportation. It’s a great question, because figuring out the right budget percentages will help you and your family achieve your big financial goals.

Why should I make a budget?

A budget gives you control of your money. And when you create a budget each month, you get the opportunity to tell your paycheck where to go instead of wondering where it went.

For first-time budgeters, the task of creating an individual or family budget can be daunting. For example, you may wonder what percentage of your income you should allocate to groceries or if you are spending too much money each month at coffee shops.

Fortunately, you don’t have to figure it all out from scratch. We created a handy budget percentages guide to help you get started!

Big factors that impact your budgeting percentages

Keep in mind that we aren’t saying these budget percentages are hard and fast rules. A lot of variables, like where you live and how big your family is, come into play when it comes to budgeting your money. For instance, a family of three in Nevada probably won’t spend the same amount of money on groceries as a family of five in New York City. Look at these budget percentages as a guide and use EveryDollar to customize it to fit your lifestyle!

Recommended Budget Percentage Categories for EveryDollar Budgeters

Category

Percentage of Overall Spending

Giving

10-15%

Housing

25–35%

Utilities

5–10%

Food

10–15%

Transportation

10–15%

Health

5–10%

Insurance

10–25%

Personal

10-15%

Recreation

5-10%

Saving

10-15%

Now let’s break each category down.

Giving

It’s been scientifically proven that generosity makes us happy. That’s one reason why we recommend allocating 10% of your budget to giving. If you want to build up to this, start smaller and work your way up to the full amount over a few months.

Housing

Housing is notoriously the biggest category in almost everyone’s budget. It’s good to be close to the 25% mark here.

Utilities

Plan to budget anywhere from 5–10% of your income for utilities such as water, lights and electricity.

Food

This category can be really small or really large depending on the size of your family, your location and your dietary restrictions. There’s definitely some wiggle room here, but if you’re working your first budget, start by allocating 10–15% of your budget to food and make adjustments from there.

Transportation

Gasoline, car tag renewals, oil changes . . . it all adds up. This category will vary depending on where you live, whether you have a long commute to and from work—or if you have access to great public transportation. Start by budgeting 10–15% of your monthly income here and adjust as needed.

Health

You never know when you may need to go to the doctor or swing by a drugstore to pick up some aspirin to nurse an afternoon headache. We recommend allocating 5–10% of your budget to health expenses.

Insurance

It isn’t the most fun expense in your budget, but you definitely need insurance coverage. And if you’re paying for it each month, you need to plan for it. Set aside 10–25% of your income for insurance, especially if you’re covering multiple people and assets (like cars and homes).

Personal

This is the category for things like haircuts, manicures and wardrobe updates. This can vary depending on your other expenses and discretionary income, but a good rule of thumb to start with by putting about 10–15% of your monthly take-home pay in this category.

Recreation

If you want to buy tickets for a concert or make reservations at a fancy restaurant for date night, you’re going to need a recreation (or entertainment) category. You can allocate about 5–10% of your budget here, and adjust to your lifestyle.

Saving

We save for three things: emergencies, big purchases and wealth building. But saving doesn’t usually happen all at once; you have to build it up gradually. That’s why we recommend throwing 10–15% of your monthly income into savings.

What if I have debt?

If you have debt, you’ll want to create your budget so you are able to pay it off as quickly as possible. That means you want to mix and match your budget percentages to create room for more money to go toward your debt payments. We recommend using the debt snowball method to pay off your consumer debt.

Creating a budget really is that easy—and it only takes about 10 minutes to get started.

A Sample Budget Using Starter Percentages

This is how a family with a $56,000 annual income (the median U.S. salary) would create a family budget using these starter budget percentages.

How to make a budget that works

Just remember as you dive in that these budget percentages are guidelines. Feel free to tweak as needed as long as you are only spending what you bring in. That’s what makes EveryDollar so great. You can create a budget based on your own family’s needs, and we take care of all the math for you.